Cowboy Up

by Joel Crews
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Cody Lane and Neil Dudley have successfully led Pederson's Natural Farms.
Best friends since kindergarten and lifetime cowboys, Cody Lane (left) and Neil Dudley have successfully led Pederson’s since the early 2000s.

Cody Lane and Neil Dudley are cowboys at heart. Growing up in Comanche, Texas, and kindergarten classmates, the two were fast buddies and are still best friends 30 years later, leading Pederson’s Natural Farms in Hamilton, Texas. As kids who grew up on working ranches, the cowboy lifestyle is in their blood and an important part of their lives today. But the two have shown an undeniable penchant for running a successful business too, and in the process have seen their lives go down very similar paths.

Pederson’s was founded in Clifton, Texas, about 25 years ago by David Pederson. “He owned it for a couple of years before the current ownership bought him out,” says Lane, who has worked as the company’s president for the past 15 years. “He was raising antibiotic-free pigs for Whole Foods back when they had just a couple of stores in Austin.”

Neither Lane nor Dudley could have fathomed that they would one day be working together, leading a thriving meat company within 30 miles of where they grew up after both graduated from two different colleges, but earning very similar degrees. Marrying girls who grew up within the same 30-mile radius, both couples have three children and work alongside their wives at Pederson’s.

Lane, who earned a bachelor’s degree in agriculture, food and fiber marketing from Texas A&M Univ., was hired at Pederson’s in 2001 to handle the company’s marketing. But he immediately assumed the role of quality assurance at the Hamilton facility, which was brand new at that time, having replaced the company’s original plant that was destroyed in a fire.

“They said, ‘OK, we need a HACCP plan, SOPs, SSOPs, GMPs, and I had no idea what any of those acronyms stood for,” he laughs, recalling his first day on the job. But after consulting with some of his former professors from college, Lane got a crash course on Hazard Analysis and Critical Control Point programs and QA with the assistance of a Texas A&M graduate student and a chemical supplier. Within a year, he was promoted to president and immediately hired Dudley, knowing his longtime friend was a hard worker with an undying will to succeed.

Dudley welcomed the opportunity, realizing his hopes of becoming a big-time calf roper competing on the professional rodeo circuit were overshadowed by the chance to grow the Pederson’s brand alongside Lane. “I was lucky,” says Dudley, who got his ag-economics degree from Texas Tech Univ. and eagerly joined his friend back in Texas after beginning a master’s degree program at Oklahoma State Univ.

“I knew I was never going to be a world-champion calf roper even though I didn’t want to admit it,” says Dudley, who learned the business from the ground up, just like Lane. Back then, the company mantra was “all hands on deck,” and with less than 20 employees the duo would work on the production floor, drive the delivery trucks and do their best to sell some more products along the way.

“Two guys that grew up riding horses are now selling bacon for a living,” muses Lane, who shares an office alongside his wife, Chrissy, the company’s office manager, who started with the company in 2004. Dudley’s wife, Stacy, also works as the company’s vice president of marketing.

Bacon blitz

Pederson's Natural Farms processes approximately 100,000 lbs. of bacon per week.
An even product mix between ham, sausage and bacon drastically changed about 10 years ago when bacon began to dominate.

Back when the two cowboys first joined the company, production was divided equally in thirds between ham, sausage and bacon. But about 10 years ago there was a dramatic shift in the product mix.

“For no particular reason, bacon started to dominate. Today bacon is 85 percent or maybe more of our business,” Lane says, mostly for retail customers but also bulk products for foodservice operators. Nowadays, Pederson’s processes approximately 100,000 lbs. of bacon per week, with one line dedicated to foodservice and another to production for retail customers. The single-shift, operation processes five days per week from a 34,000-sq.-ft. facility where about 60 employees work on two production lines. The plant sits on 120 acres of undeveloped land, most of which stretches far behind the back door.

About 40 percent of its processing is done on a private-label basis and the remaining portion is under the Pederson’s brand. The company is an appealing partner to other brands as a co-packer, not necessarily based on what it costs.

“There’s probably some cheaper (co-packer partners) but quality is what will always win,” Lane says. Pederson’s also relies on co-packer partners to handle processing of its non-core products.

At the end of 2015, the executive team was gearing up for a significant commitment of resources to begin processing pre-cooked bacon and bacon bits at its plant. Plans for delivery and installation of a new spiral oven from Unitherm was just days away and Lane’s team was anxious to ramp up production and begin offering the new products to new and existing customers.

“I expect the new equipment to generate current customer and new customer sales growth the day we turn it on,” says Dudley. They look forward to offering several of their staple items in a more convenient and recognizable format for their consumers. As always, there are several new innovative ideas already being considered as part of the new system.

With sales of approximately $30 million in 2015, Pederson’s has consistently reported growth of 38 percent, 35 percent and most recently 24 percent in each of the past three years. In its product mix, bacon products are the biggest sellers by a longshot and sales of hams tend to grow at the slowest rate. Meanwhile, Pederson’s makes 20 varieties of linked sausage products, all of which are in natural casings using a process that utilizes natural smoke.

With the popularity of Pederson’s bacon growing almost exponentially over the past decade, fitting in production time to gear up for the holiday crunch for ham and its other offerings can be challenging. Mid-September is when ham production peaks, until the final shipments are made, typically in early December.

“People eat a lot of meat during the cold time of the year,” says Dudley, vice president. “And they want a lot of sausage and bacon,” requiring operational balance and careful scheduling for the seasonal push for ham each year. The company processes up to 120,000 lbs. of ham per year, most between September and December.

The company has benefitted from the avalanche of consumers adopting the Paleo diet, and more recently the Whole 30 diet as its no-sugar formulation and natural attributes fit well into these animal-protein-based plans. Pederson’s no-sugar bacon has taken the lead as its top-selling new offering and was an innovation that was a perfect example of how a small, nimble company with a good idea can incorporate an idea into its production and get it to market in a matter of weeks instead of months or years. The no-sugar products have expanded beyond just bacon and the products’ labels include the “Whole 30 Approved” marketing claim, which refers to a regimen based on a 30-day nutritional reset, eliminating unhealthy cravings, improving metabolism, digestive tract healing and other benefits by sticking to an animal protein-rich, sugar-and carbohydrate-free diet for 30 days.

The company also markets an organic bacon line but its growth is limited by supply, Lane says. For years, Applewood-smoked bacon has been and and still is the company’s biggest seller, but Pederson’s also offers hickory- and cherry wood-smoked products in addition to a pepper-flavored profile and all are available in a variety of thicknesses. More recent innovations have included honey-enhanced bacon, jalapeño-flavored, barbecue and the no-sugar line, which has also been utilized in the production of hams.

Common production with a twist

More than 40 percent of Pederson's bacon processing is done on a private-label basis.
About 40 percent of Pederson’s bacon processing is done on a private-label basis and the remaining portion carries the company's own branding.

Pederson’s naturally cured product claim is no longer a novelty in the marketplace as the practice of using ingredients such as celery powder to provide a cleaner label is widely used throughout the industry. The company receives skinned and square-cut bellies each day, which also is similar to many other bacon processors, but Pederson’s process from there is unique. Bellies are hung and smoked in one of three smoke houses, which can hold up to 8,000 lbs. of bellies at a time.

“We don’t inject our bellies. We vacuum tumble everything,” Lane says, which is a four- to five-hour part of the natural curing process, followed by four to five hours in one of three smokehouses using natural wood, the newest of which is Nu-Meat’s Friedrich unit capable of handling up to 8,000 lbs. of bellies. The processes are based on common practices but controlling all the factors was made easier during the company’s last renovation, which included linking the smokehouses to Powis PLS controllers to digitally monitor and capture processing data throughout the production process.

“We can look at cook times, temperatures throughout the smokehouse, mechanical variability, the whole works,” says Scott Cooney, vice president of operations. Cooney’s background includes working in operations and quality assurance with large-scale processing facilities. He was a part-time consultant with Pederson’s before joining full-time about six years ago. Like Lane and Dudley, Cooney has connections to the Hamilton region, as his family’s ranch is located within about 30 miles.

“We’re very numbers driven and use a continuous improvement style of management because we know if we can measure it, we can make it better,” Cooney says. Investment in such technology is significant but the return on these investments occurs quickly, Cooney says, adding that the controllers have already paid for themselves.

After curing and smoking, bellies are chilled in a step-down cooling approach that ensures they don’t get too cold, too quickly. The entire chilling process requires about 24 hours before the bellies are tempered and ready to be pressed using a single Hoegger bacon press the company recently purchased. To keep up with the growing demand for bacon, Pederson’s also recently invested in a high-speed slicer manufactured by Thurne. The equipment utilizes a visioning system to ensure customer specifications are being met and quality consistency is maintained.

Maintaining process control and consistent repetition is what keeps demand for Pederson’s products growing at foodservice and in the retail case. Cooney points out that the processing technology and tools are part of the equation, but the expertise of the workers is just as essential.

“The smokehouse operators and slicer operators, they all know their equipment and they are empowered to drive improvement at that level and all the way through the process,” he says. The operators are able, for example, to listen to the sound of the slicing blade hitting the bellies and discern whether or not the meat has been tempered correctly, and make adjustments on the fly to offset any variance. “It’s truly gotten down to an operator level,” when it comes to process improvement, Cooney says.

Sausage production at the plant depends on demand but the chopping, stuffing and linking process is usually going on between four or five days per week. While most of the ham production, especially the spiral-cut, bone-in products, is largely based around the holidays, Cooney says there is intermittent ham processing that goes on during the year for a couple of companies Pederson’s co-packs for.

Natural nuances

Scott Cooney, Pederson's Natural Farms
“We live by ‘if you measure it you can get better or improve,’” says Scott Cooney, vice president of operations.

Processing of natural and organically sourced hogs creates consistency issues because producers supplying Pederson’s typically are raising smaller numbers of animals and variation between the growers of the specialty hogs is a given. This variability is evident on the processing line, says another veteran of the company’s operations. About 60 percent of the ham production is for retail customers while the remaining 40 percent is shipped to further processors, according to Chad Ondrusek, plant manager. He says the company’s fresh sausage production (ground and link varieties) accounts for about 100,000 lbs. per year in addition to its smoked sausage, which has been outsourced to a co-packer partner in the last four years due to space constraints at the Pederson’s plant.

With 20 different varieties available, the Kielbasa sausage is the most in-demand link processed at the facility while blends with jalapeños are regionally in high demand. Among sausage products, Pederson’s offers chorizo, Andouille links (foodservice), Hatch Green Chile (foodservice), hot and mild varieties of Italian ground and linked sausage as well a line of fully cooked breakfast links, little smokies and uncured beef hot dogs (foodservice). Its no-sugar options include ground Italian sausage and smoked Kielbasa.

Uncured, smoked whole and half hams are available for foodservice and retail customers as well as thick-cut ham strips, diced ham and petite hams in 1.5-lb. packages

To keep the company growing and serving its growing niche, Lane and Dudley agree that investing in talented people and in technology is critical. Cooney is a perfect example of an operations-focused member of the team with a flair for technical details. “He’s the R&D guy too,” Lane says.

“Cody and Neil invested in equipment that was state of the art but also systems to collect data so we can look at real numbers and react to those numbers,” Cooney says. “We live by ‘if you measure it you can get better or improve,’” he says.

“We were lucky enough to get involved with a company that was small enough for us to learn as we went while allowing us to do what we could see the market wants,” Dudley says. Identifying consumers’ interest in animal welfare, food safety and nutrition has been one of the secrets to the company’s success. The next step was complying with the requirements of Certified Humane certification, Global Animal Partnership, SQF and non-GMO audits, just to name a few examples of audits that have paid off.

“We learned quickly, thanks in large part to Whole Foods that we were going to have to take on a lot of audits and be really good at what we do. Nowadays, you couldn’t give us an audit we couldn’t pass,” he adds.

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